More To Come

Tyler Durden's picture

Submitted by Mark J. Grant, author of Out of the Box,

I have long held the opinion that the markets, all of them, have been buoyed by what the Fed and the other central banks have done which was to pump a massive amount of money into the system. There are various ways to count this but about $16 trillion is my estimation. The economy in America has been flat-lining while the economies in Europe have been red-lining and while China has claimed growth their numbers did not add up and could not be believed.
In other words, the economic fundamentals were not supporting the lofty levels of the markets which had rested upon one thing and one thing alone which was liquidity. I have also stated often enough that the long awaited reversal would take place either due to an "event" or due to a change in the Fed's position where the liquidity was going to be stopped. In one of the clearest and most open meetings ever conducted by the Fed, in my opinion, they said quite clearly that the end to its liquidity operations was coming and while the postulated this and that if the markets did this and that the message was quite clear; we are going to unwind what we have we have done.
Yesterday was the first day of the reversal. There will be more days to come.
What you are seeing, in the first instance, is leverage coming off the table. With short term interest rates right off of Kelvin's absolute Zero there was been massive leverage utilized in both the bond and equity markets. While it cannot be quantified I can tell you, dealing with so many institutional investors, that the amount of leverage on the books is giant and is now going to get covered. It will not be pretty and it will be a rush through the exit doors as the fire alarm has been pulled by the Fed and the alarms are ringing. There is also an additional problem here.
The Street is not what it was. There is not enough liquidity in the major Wall Street banks, any longer, to deal with the amount of securities that will be thrown at them and I expect the down cycle to get exacerbated by this very real issue. Bernanke is no longer at the gate and the Barbarians are going to be out in force.
Yesterday was not pretty but today is likely to be worse. Gold is getting smashed, equity futures are down significantly, bonds are taking it on the chin and the only thing that is up is the Dollar. Then besides the Fed's announcement; China is a rose dying on the vine. Their overnight repo rate hit 25% as the fear is palpable in Asia between the collapse of the Everbright Bank and the antics in Japan. The yield on China's three year government bonds rose 12.5% last night while their flash PMI plunged to 48.2 which is the worst number in nine months.
Now you may be wondering what to do next. You will hear a lot of people in the media today saying that this is just a normal part of the market's cycle.
This is not the case.
The Fed has signaled its intentions very clearly. You should be taking profits, taking money off the table and building up your cash positions. Your supplier of opiates has just informed you that your drugs are going to get cut off and preparations need to be made because there is no other supplier of this opiated cash. You can accurately think of the world's central banks as a "cash cartel" and the distribution is being ended.
How bad it is going to be is uncertain but BAD, with capital letters, in my estimation. For four years we have lived on drug money supplied by the Fed and their colleagues and what the emperors' can give; they can take away.
Eventually Treasury yields will go back down because the Fed will be buying more bonds than the Treasury needs to issue but for now the "leverage issue" will overcome that reality. Mortgage rates will be heading higher, the Real Estate market is going to correct and the days of wine and roses are now behind us.
The party is over!
"It's my party, and I'll cry if I want to

Cry if I want to, cry if I want to

You would cry too if it happened to you"
             -Lesley Gore

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LawsofPhysics's picture

Stop it.  There are no "markets" for true price discovery, aside from local black markets of course.  Now that greed and fraud are the status quo, possession is the law.

GetZeeGold's picture



To big to fail becomes to big to bail.


Now perhaps we'll find out what the real price is.

LawsofPhysics's picture

Execute all these paper-pushers and political puppets.  Their labor is of no real value anyway.

flacon's picture

10-Year Treasury 2.44 +0.07 +2.95%

Manthong's picture

If FDR could have driven the price of gold down (he did not have the ability to) prior to EO 6102, he would have.

He did (devalue the dollar) by boosting the price of gold big time after he got his hands on most of it.

This time is different.. not from the perspective of the dictatorial elite, but from the knowledge and perspective of the citizenry.

..just sayin’

Dr. No's picture

I agree.  I laughed at Bill Gross talking about how the market misinterpreted bernanke.  No doubt bernake will keep the spigot on.  However, the algos counter noted "tapper" was published more often than "purchase moar" and therefore they dumped.  Its that simple.

LawsofPhysics's picture

Another POMO day, we close green,  bank no sell on it.

Cunnial's picture

I don't think "Taper" was mentioned once, in the release or the Q&A... just saying. 

Still... Fuck you Bennie...

Dr. No's picture

Two nights ago, Cyberdyne upated the routine:  "Taper" = "Puzzled" = "margin call" , DO {SELL} for=ever.

Dr. Engali's picture

Actually the robots were confused by 'puzzled' and didn't know what to do so by default they withdrew liquidity.

Treason Season's picture

Wnat's puzzling you is just the nature of Satan's game.

Cunnial's picture

"China is a rose dying on the vine."... Huh? 

HardAssets's picture

I don't have a green thumb, but do roses grow on vines ?  Never bought a dozen of them that came that way.

thismarketisrigged's picture

u.s futures are only down slightly now in terms of pct pts.


europe is down over 2 percent across the board, and asia got clobbered.


im not going to be fooled by the futures, today we should see a -250 day on dow easily and -30 on s&p. there will be lots of panic and i will love watching it.

Bobbyrib's picture

I wouldn't be surprised to see the markets end up in the green. Then someone will check the Bloomberg terminal and the Fed will be logged in at maximum capacity.

flacon's picture

I think we will close below the 50 dma on the Dow and S&P. That is going to trigger a whole NEW wave of selling as technicals get obliterated and even the bulls agree that we are in a bear market now. 

HardAssets's picture

Congress too, of course.

The Devil's picture

I'm just getting started...

Atlantis Consigliore's picture

the Monkee to Ben:  "YOU RE FIRED."    

JJSF's picture

I like Grant's stuff. But he is wrong here.

The p/e of the market after this correction and given the growing energy boom and it's consequences for manufacturing and the supported peripheral industries involved and transporting gas, liquifying gas, oil etc is not overvalued. Also, Keep in mind that every central bank in the world is now openly buying equities and this will not stop until it's time to pop that bubble and start over. We will rally from here

YC2's picture

Thanks a lot, this insanity gave me a good chuckle this morning.

Dr. Engali's picture

It's articles like this that tell me it's not over. When Mark Grant and Graham Summers start waving their arms frantically screaming "it's over"....its not over. When it's over there won't be any " market participants" because the markets won't be there.

Bobbyrib's picture

IMHO, it's a head fake. Why would the Fed pump the market to ridiculous levels then allow it to plummet? It would destroy its credibility with the average sheeple. Within two weeks Bernanke will take back the QE tapering.. All of us ZHers know it is hurting the real economy, but that will not stop the Fed. The Fed is the markets and the markets can not go into free fall.

LawsofPhysics's picture

Well at least not until they have complete power and control (which is what this is all really about) of the assets and resources they want.  There is something much more sinister behind all this, history is very clear on this point.

Doctor of Reality's picture


People are getting caught up in a game of checkers, while TPTB are playing chess.... soon to be followed by dominos.

fonzannoon's picture

Okay Goddammit Everyone Huddle Up! You guys are a mess out there. Forget the huddle, back to the bench and pick up the Goddamm playbook and look at it! Look at it! What does it say? What does it say!

It says create the illusion of growth. We did that. Then what does it say? It says announce the withdrawal of stimulus. Then we let interest rates rise to validate the illusion of growth. Everything is going to plan. Yes grandma and her bond fund are dead and several gold bulls are now instutionalized, but that was collateral damage and we knew it.

So now what? Now we take the victory lap. Who knows how long it will take. months? maybe a few years? Probably not.

Once we are all convinced we are back to normal then in the 4th quarter we have the big fuckin thing that no one saw coming that smashes the markets and we come running back in with massive stimulus. Now get back out there and get your heads outta your asses!

mofreedom's picture


flapdoodle's picture

Could well be a head fake - but like Chernobyl, the Bernanke may find out that the controls aren't responding anymore. Many were expecting tapering and that is what they interpreted - but the great unwind could well  be irreversible, so QE4 may not work...

Debugas's picture

Those in debt have no money to repay their debts

but not everyone is in debt

so deflation can not go down to zero but there will be many dead bodies on the way down



LawsofPhysics's picture

There is no such thing as deflation.  You are being fooled by progressive language, stop using it.  No society or currency has ever collapsed or died because their purchasing power was too strong.

KidHorn's picture

I think the Japs would disagree.

LawsofPhysics's picture

Bullshit.  What has the price in yen for food and fuel been over the last 5, 10, 15, or 20 years in Japan?  Are you retarded?  Do you not expect to live more than 20 years?  The problem with your debtor/deflation thesis is that those debtors still need to be fed and kept warm.  You would only get true deflation if those debtors were to be "disappeared".  Likewise, inflation is "low" only if you believe people/economies don't require food and fuel (calories) to actually run.  Wake the fuck up and hedge accordingly.

aleph0's picture

Bubbles don't "unwind" , they CRASH.

..." the message was quite clear; we are going to unwind what we have we have done. " ... in "Rollover" :


therearetoomanyidiots's picture

Meh, this I fear is just 'shaking the tree' to get some more easy money out of weak investors.   

This I fear will be no bigger than Snowden's uncovering of the NSA spying 'scandal'.  

Heads WON'T roll and the rich will get richer.  

Bobbyrib's picture

Next headline: Goldman Sachs tells its clients to sell everything not nailed down. That will confirm that Bernanke was bullshitting yesterday.

therearetoomanyidiots's picture

One must wonder, though, that perhaps what a 'crash' brings is deflated 401ks...which means the government has to come in and provide a nationalized pension plan which will start with confiscating everyone's 401k and 'redistributing' it in a defined benefit plan?  Hmmmm....always watch what the other hand is doing...

LawsofPhysics's picture

In countries/states/cities with a relatively unarmed/untrained populace that might work.  For countries/states/cities with a large number of recent veterans or active volunteer military personnel, not so much.

therearetoomanyidiots's picture

I hope you both are right...but the way things have fallen out with NSA spying, IRS intimidation, the way the market flies up at overwhelmingly poor market data...I have to wonder.   But, in fact, I pray you both are right.

Bobbyrib's picture

Yeah, but even the sheeple will wake up when they have been sheared yet again and the "End the Fed" movement will pick up even more steam.

horot's picture

YES!! More rout please!

SillySalesmanQuestion's picture

We here have been head faked, swivel hipped and cross-over dribbled so many times by the Kevin Henry's and Plunge Protection Team that some are doubtful that we would ever see the light at the end of the tunnel.....let round 1 of this sorry escapade begin,hopefully with a KO to the FED   :)

gatorengineer's picture

Look for China to start to print, good for a 5% pop, look for Europe to also go full retard good for 10% pop, and look in august/sept for the fed to go to 120..... 

They have plenty of paper and ink left, it wont be a smooth ride down...


Closing DUST at 119, still looking for 75 on EDZ.....